Facts:The petitioner, registered as an Input Service Distributor (ISD), accumulated Input Tax Credit during FY 2017-18 and 2018-19 and distributed the credit in March instead of distributing it month-wise. During audit, the department alleged violation of Rule 39(1)(a) of the CGST Rules which requires ITC available in a month to be distributed in the same month and issued a show cause notice proposing penalty of ₹8,38,67,332 under Section 122(1)(ix) of the CGST Act. The petitioner challenged the constitutional validity of Rule 39(1)(a) and the consequential proceedings.Court Decision:The High Court held that Section 20 of the CGST Act, as it stood prior to 01.04.2025, did not prescribe any time limit for distribution of Input Tax Credit by an Input Service Distributor. Rule 39(1)(a), by mandating that the credit available in a month must be distributed in the same month, introduced a substantive restriction not contemplated under the parent statute.The Court held that the rule-making authority cannot impose a limitation period through delegated legislation when the parent statute does not provide for such limitation. Consequently, Rule 39(1)(a) of the CGST Rules, to the extent it mandates distribution of ITC in the same month, was declared ultra vires Section 20 of the CGST Act.The Court further held that the audit proceedings and show cause notice were also vitiated due to violation of principles of natural justice and improper invocation of extended limitation when all details were disclosed in GST returns. Accordingly, Rule 39(1)(a) was struck down to that extent and the final audit report dated 22.01.2024 and show cause notice dated 30.01.2024 along with consequential proceedings were quashed.Cases Referred by Court:•    Lakshmi Rattan Engineering Works Ltd. vs. CST•    Sales Tax Officer vs. K. I. Abraham•    Global Energy Ltd. vs. Central Electricity Regulatory Commission•    Kunj Behari Lal Butail vs. State of H.P.•    Kirloskar Brothers Ltd. vs. State of Jharkhand•    Bharat Barrel and Drum Manufacturing Company Ltd. vs. ESI Corporation•    Pushpam Pharmaceuticals Company vs. CCE 

BackgroundThe assessee, a manufacturer of ply-woods and related products, sold approximately 2% of its production ex-factory at its manufacturing location and the remaining 98% to dealers from its depots across the country. The assessee had filed a declaration under the Central Excise Rules declaring ex-factory prices. The Revenue found a significant price difference between ex-factory prices and prices at which goods were sold from the depots. In the course of investigation, statements of two buyers — partners of two trading firms — were recorded by the Revenue. Based solely on these statements, a Show Cause Notice dated 03.05.1995 was issued proposing that the depot sale prices be adopted as the basis for determination of excise duty value. The assessee filed a reply contesting the demand, pointed out that earlier identical proceedings had been decided in its favour by the Tribunal (not appealed by Revenue), challenged the correctness of the statements of both witnesses and specifically demanded the right to cross-examine them. The Adjudicating Authority confirmed the demand without granting cross-examination — and notably, the Adjudicating Authority itself acknowledged in its order that such a request had been made. The CESTAT dismissed the assessee's appeal, holding that cross-examination of the dealers could not have brought out any material not already in the assessee's possession. Relevant FactsThe entire basis for issuing the Show Cause Notice was the statements of the two witnesses. No other independent material was relied upon by the Revenue to justify the demand. The assessee had specifically and expressly demanded cross-examination of those witnesses and disputed the truthfulness of their statements. The Adjudicating Authority not only rejected the cross-examination request but also failed to deal with that plea in the order. The CESTAT further compounded the error by ruling that cross-examination "could not have brought out any material which would not be in the possession of the appellant themselves" — thereby substituting its own guesswork for the assessee's strategic litigation decision. Additionally, the price list of the assessee maintained at its depots was also independently relied upon by the Adjudicating Authority to determine the duty value. The Supreme Court noted that whether the goods were in fact sold at the price mentioned in the price list was itself a matter that could have been probed in cross-examination.   Court Observations (Verbatim)"Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected."— Court's core finding on violation of natural justice"It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority."— On the Adjudicating Authority's conduct"As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them."— On the Tribunal's reasoning being "totally untenable""The appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above."— On the scope and purpose of cross-examination"If the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice."— On the critical evidentiary consequence of denial of cross-examinationTribunal's Rejected Reasoning (Para 6 of Tribunal Order — Quoted and Overruled):"The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders."— Held by Supreme Court to be "totally untenable"  Final VerdictAppeal allowed. Impugned order of the CESTAT set aside. The Supreme Court held that denial of cross-examination of witnesses whose statements formed the sole basis of the Show Cause Notice and the demand order is a serious flaw rendering the order a nullity as it amounts to violation of the principles of natural justice. No costs.

BACKGROUNDThe appellant was engaged in trading dialysis equipment and providing maintenance and leasing services. Service tax was paid on AMC and CMC services, while leasing of equipment was treated as deemed sale and subjected to VAT. During audit, the Department took the view that the leasing transactions were taxable services because ownership, possession and effective control remained with the appellant.The Department alleged that the taxable leasing services had not been declared in ST-3 returns and that the appellant had suppressed the relevant facts with intent to evade service tax. A show cause notice was issued invoking the extended limitation and the proposed demand, interest and penalties were subsequently confirmed by the Order-in-Original.COURT OBSERVATIONSThe Tribunal examined the distinction between a deemed sale and a taxable service. It noted that Article 366(29A)(d) covers transfer of the right to use goods, whereas Section 66E covers transfer of goods by hiring, leasing or licensing without transfer of the right to use those goods.The Tribunal relied upon the principles laid down in BSNL v. Union of India, under which a transfer of the right to use goods requires, among other things, a legal right in the transferee to use the goods and exclusion of the transferor during the relevant period.On examining the actual agreement, the Tribunal found that the equipment could be used only in accordance with the appellant's specifications and instructions, the appellant retained maintenance and insurance responsibilities, and it retained rights of inspection. The Tribunal held that the relevant conditions for transfer of the right to use were not satisfied.The Tribunal concluded that mere permission to inspect and maintain the equipment was insufficient to establish a deemed sale. The usage of the equipment remained subject to the appellant's approval and maintenance and insurance expenses remained with the appellant. Payment of VAT was also held insufficient to change the character of the transaction.FINAL VERDICTThe Tribunal found no infirmity in the Order-in-Original and held that the activity constituted a taxable service. The appeal filed by the appellant was therefore dismissed.CASE REFERRED BY COURTBharat Sanchar Nigam Ltd. v. Union of India (BSNL) — Supreme Court of India — 2006; exact order date not stated in the PDF. The Tribunal applied the principles concerning transfer of the right to use goods.Indian Compressors v. Union of India — Delhi High Court — 2025; exact order date not stated in the PDF. The Tribunal expressly stated that it drew support from this decision.

BACKGROUNDA show cause notice under Section 73 was issued and an adjudication order was subsequently passed. The appeal against that order was rejected on the ground of delay under Section 107. Thereafter, an application for rectification under Section 161 was filed. The applicant later discovered that the rectification application had already been rejected, although the rejection order had not been communicated.The order-sheet contained an order dated 30.05.2024 stating that the rejection order could not be generated through the GST portal because of technical problems. However, the actual rejection order placed on record bore the handwritten signature of the Assistant Commissioner dated 30.05.2025. The Department did not dispute the relevant factual position emerging from the certified order-sheets.COURT OBSERVATIONSThe Court examined the order-sheet and the actual rejection order and found a clear inconsistency between them. The order-sheet dated 30.05.2024 recorded that the rejection order could not be generated because of technical glitches, whereas the actual rejection order was signed by the Assistant Commissioner on 30.05.2025.The Court therefore found that the impugned rejection order could not be sustained in law. The Court also noted that the applicant had not been afforded adequate opportunity to present its case during the Section 73 proceedings and that relevant records/documents were available or had been uploaded on the portal.FINAL VERDICTThe Court quashed and set aside the rejection order dated 30.05.2025 passed under Section 161. The matter was remanded to the Assistant Commissioner with a direction to reconsider and dispose of the rectification application after considering the grounds, supporting documents and records.The applicant was directed to appear before the authority within fifteen working days and the authority was directed to provide an opportunity of hearing and pass an appropriate reasoned order under Section 161, if rectification was warranted.

BACKGROUNDThe dispute arose from rejection of refund of transitional ITC. The Court found that the petitioner had not produced the TRAN-1 declaration or satisfactory material establishing availability of the disputed transitional credit in the Electronic Credit Ledger as on 01.07.2017.The writ petition was also filed after expiry of the statutory appeal period. The Court therefore considered whether its discretionary jurisdiction under Article 226 could be invoked to revive the time-barred claim.COURT OBSERVATIONSThe Court held that the transitional credit could support the refund only if the petitioner established that the credit was available in the Electronic Credit Ledger as on 01.07.2017. In the absence of satisfactory proof, interference with the adjudication order was not warranted.The Court further held that Article 226 could not be exercised to resurrect a cause of action which had become unenforceable by limitation. Entertaining the belated writ petition would be contrary to the principle that litigation should attain finality.FINAL VERDICTThe writ petition was dismissed as devoid of merit. The Court declined to interfere with the refund rejection order.CASE REFERRED BY COURTThe same cases were referred to and considered in the judgment:Moriroku UT India (P) Ltd. v. State of U.P. & Ors. — Supreme Court of India — 2008..A.V. Venkateswaran, Collector of Customs, Bombay v. Ramchand Sobhraj Wadhwani — Supreme Court of India — 1961.Rikhab Chand Jain v. Union of India — Supreme Court of India — 2025.Lt. Col. K.C. Chandra Bhanu v. Union of India — High Court of Kerala — 2026.Assistant Commissioner (CT) LTU v. Glaxo Smith Kline Consumer Health Care Ltd. — Supreme Court of India — 2020.